SOC/LAW: Economics and Law of Ocean Settlements (was "Extropian Country")
Sun, 22 Feb 1998 12:24:03 EST

Use of large vessels as the basis for some sort of extra-national entity is a
recurring idea. One often encounters questions about costs in such
discussions, but little data. A quick web search this morning turned up an
excellent article discussing the current economics of oil tanker ownership and

An Analysis of Costs, Profits and Complications
N. Shashikumar, PhD

Shashikumar discusses the current capital and operating costs for the four
standard classes of liquid bulk carriers. Below is a list of those classes
and their sizes in "dead weight tons", the standard measure of ship size (a
measure of the weight of water displaced by the vessel without cargo):

"Very Large Crude Carrier" ("VLCC") (295,000 dwt)
Million Barrel ("MM Bbl") (130,000 dwt)
Suez-Limited ("Aframax") (80,000 dwt)
Product Carrier ("PC") (30,000 dwt)

To get a common sense impression of the size of these vessels, a PC is pretty
much the size of a standard break-bulk cargo ship, while VLCCs are the largest
true vessels afloat, dwarfing aircraft carriers. Presumably VLCCs are what
utopians have in mind when envisioning "floating free zones".

Shashikumar's article provides the following figures for the cost of such
vessels. The following table displays rounded figures extracted from his
article, expressing the cost of a 1995 newbuilding, the projected resale value
of such vessels in 2000 and the cost of such vessels in terms of their
lifetime capital and operating costs:

95 NB - 2000 Resale - Break-even

VLCC: $100MM - $78MM - $140MM
MM Bbl: $73MM - $56MM - $100MM
Aframax: $49MM - $28MM - $62MM
PC $40MM - $18MM - $50MM

The following table displays a rough rounding of Shashikumar's calculation of
projected mean daily and annual operating costs over the next 5 years for such
vessels in terms of capital and operating expenses:

VLCC: $46,000 - $16.8MM
MM Bbl: $34,000 - $12.4MM
Aframax: $24,000 - $8.8MM
PC $21,000 - $7.7MM

A couple of things pop out of Shashikumar's numbers. First, these boats are
EXPENSIVE. Second, there are some serious diseconomies in building them these
days, despite the figures he presents showing the very healthy state of demand
for them. Accordingly, the glut of tonnage most writers seem to be
remembering when they say "Let's get one of those surplus tankers for our
start-up enclave" is a thing of the past.

Without looking for numbers from an equally well-researched and analyzed paper
as Shashikumar's, I can relate that the market for non-vessel platforms is
equally bad for the would-be utopian. Mobile rig demand relative to supply is
at an all time peak right now: About six months ago I attended a seminar where
figures were presented showing that essentially the entirety of the world
fleet of so-called jack-up rigs was booked up for the foreseeable future.

Fixed platforms present a different picture. Those currently working do so
because they are still paying out for their present owners and are therefore
not available at prices that don't reflect the underlying economics of
hydrocarbon production. Thus any would-be utopian must compete with the likes
of Shell and Exxon for purchase of a working platform. Abandoned platforms
are a different story. Unfortunately the world's coastal states are all
following the lead of the U.S., requiring owners of platforms to remove them
at the end of their useful lives. Such structures are either cut free and
floated to scrappers or are reduced to artificial reef status by the use of
some pretty spectacular explosives engineering.

The real world of maritime and energy markets therefore points to the
possibility of rescuing an abandoned platform from the scrappers or the fishes
as the only remotely realistic alternative. Such structures are usually not
that large, although they are STOUT and could conceivably support more of a
superstructure than they already do, if clever engineering were brought to
bear, and could also serve as a base for further expansion.

Unfortunately, all such structures of which I am aware are within the 200-mile
"Exclusive Economic Zone" ("EEZ") defined by UNCLOS, the United Nations
Convention on the Law of the Sea. Under UNCLOS, the coastal state has the
exclusive right to regulate the economic resources of the EEZ and fixed
platforms situated in the EEZ become, for all practical legal purposes,
territorial islands of the coastal state. Accordingly, one searching for an
escape from the legal regimes of current nation states won't do so on existing
fixed ocean platforms.

A couple of years ago Tom Morrow cryptically wrote to me that he had searched
maps of the world's oceans and had located at least one promising geographic
area of relatively shallow water outside the EEZ of any existing state. I've
not tried to reproduce this discovery but, if a terrestrial physical base
beyond the reach of national sovereignty will be important in transhumanity's
future, this "last free place on earth" could be very important. As far as I
know, this "lost horizon" does not lie above any known hydrocarbon deposit, so
the oil companies won't be building structures there that, once abandoned,
might form the seed for an ocean enclave. Extra-national colonists will
therefore have to foot the bill themselves for building anything on such
submerged territory.

Greg Burch <>----<>
Attorney ::: Director, Extropy Institute ::: Wilderness Guide -or-
"Good ideas are not adopted automatically. They must
be driven into practice with courageous impatience."
-- Admiral Hyman G. Rickover